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In 2013-14, Australian industry received over $17 billion in gross assistance from the Australian Government through budgetary outlays, tax concessions and tariffs according to the latest annual trade and assistance review by the Productivity Commission.

Notably, budgetary assistance to industry in 2013-14 was about 17% (or $1.3 billion) higher than in 2012-13.

The review finds that while tariff assistance today is much lower than it was - from as high as 125% in 1985 to a maximum of 5% today - on average it 'taxes' every Australian about $150 each year. Businesses incurred an estimated $7.3 billion in additional input costs in 2013-14, from the same source.

The net effect of assistance varies significantly by sector. Manufacturing remains the biggest beneficiary, receiving around $7 billion in net assistance. Other sectors do far less well from the taxpayer. Services once again bear a greater imposed cost - with the tariff penalty on their inputs perversely outweighing the benefit from government assistance measures.

The review highlights that services are more important than traditional trade statistics suggest. While trade statistics suggest that manufactures are about 36% of Australian exports, on a value added basis much of this is composed of services. Consequently, services are more like 42% of Australian trade; and manufactures fall to around 14%. Imposing a net burden on services through industry assistance measures in part designed to promote exports appears even less explicable.

The trade and assistance review 2013-14 also outlines policy insights from the evolution and recent developments in the measurement of global value chains. The new data tracks global value chains as goods and services journey between countries, regions and industries before they end up in the hands of the consumer. This recently available data shows that more of our exports ultimately end up in Europe and the United States than suggested by traditional Australian trade data.

The review also comments on the weakness of Government assessment of both industry assistance and preferential trade agreements (otherwise known as 'free trade agreements'). Established benchmarks for assessment are not being applied. Even if the policies were advisable, the analysis to support that is not being developed as might be expected.

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